No win No fee – No obligation – Free Case review – No loans = confused yet?

February 1, 2018

 

Let’s unpack some commonly used words by injury lawyers.

 

No win no fee

Usually, this means the law firm will not charge you for their professional fees if your claim is unsuccessful.  However, if you lose in Court after a trial, or simply wish to walk away from Court action, you could face a Court order to pay the legal fees and expenses of the other side.  This is not covered by your own lawyer.

 

Many law firms also include expenses (see below for other words used for this type of cost) in their no win no fee promise.  Read the fine print.  Some law firms now do not charge for expenses even if you win.  This may impact cost recovery against the other side – I am unsure how they can obtain reimbursement for your claim for expenses they can’t bill you, as costs follow the person claiming, not the lawyer representing them.  It could also impact the 50-50 rule on fees (also discussed below).

 

A law firm can cover you for the other side’s legal costs if you lose if they agree to do this up front.  Again, read the fine print.

 

No obligation or First Consultation Free

No obligation means if you don’t proceed with your legal claim then the lawyer will not charge for your first consultation.  If you do proceed, then the time spent with you, excluding explaining the costs agreement, will be included in your final bill.

 

First Consultation Free means the time spent at that meeting is not included in your final bill.

 

Free case review

A simple offering to get you in the door so the lawyer can look at your claim and give themselves the opportunity to sell you on making a claim (or using them instead of your current lawyer).  There is nothing wrong with getting free advice, but you may suspect their recommendation if you are not paying for a service to start with.

 

No loans – or no litigation loans – or no disbursement loans

Most law firms either fund expenses incurred in acting for a client and charge interest or use a third party to lend money to the client to fund these expenses.

 

No loans - means the law firm or you fund expenses.

 

A litigation loan means a third party financier will advance up to a set amount to reimburse the law firm when they pay an expense on your behalf.  The third party will charge fees and fairly high interest rates on the loan (or just a set fee such as half the expense or up to 100% of the expense funded), which is repaid once your claim settles and funds are paid to the lawyer.  Common figures are $300 - $500 for loan fees plus similar sum for interest.

 

Expenses, outlays, disbursements, third party expenses, other lawyer costs etc.

Anything you fund, or a law firm pays for on your behalf, or agrees to pay for, becomes an expense to your claim.

Common examples are paying a medical centre for their records ($100 - $600), a specialist for a report ($1,000 - $5,000), Court fees, government search fees, investigators, practice support outfits (eg to prepare large volume brief), barristers and liability experts like engineers.

 

It takes a lot of evidence gathering to run a successful claim, and this doesn’t come cheap.

 

None of these costs should be part of your lawyer’s fees, or even their bill.  However, to facilitate ease of understanding, lawyers incur the charges and include them in your bill as expenses.  The bill should be made out to the lawyer, to avoid extra GST on the expense, unless it is to be paid from a trust account in your name from funds you have paid for your claim.

 

Sundries are also sometimes charged (eg photocopying, telephone, fax, postage).  These are internal expenses of the law firm and form part of their professional fees and should not be listed as an expense item.  A law firm should also not charge any uplift charge on sundries.

 

Cap on fees – uplift on fees

There are voluntary caps on fees lawyers can self-impose for their fee charge, and there is the legislated 50% cap.

The self-imposed cap is a maximum fee the lawyer is willing to be bound by based on your settlement amount, but cannot be an agreed lump sum fee ahead of time.

 

For example, a lawyer can say I will charge you either an hourly rate or $X for each stage of a claim, and give an estimate of total costs, but also agree not to go over Y% based on the claim result.

 

See for example my own 25% promise of settlements over $100,000.  This caps my maximum fee on a $100,000 claim at $25,000 GST incl should my overall work be higher than this amount.

 

However, a lawyer cannot just say to you my fees will be 25% or 30% of whatever you settle for.  This is unlawful.  A lawyer needs to show how their work matches their charge method.

 

The 50% cap is the legislated maximum any compensation lawyer can charge in a personal injury claim if acting for the person when the claim resolves.  A lawyer who previously acted for you but you terminated the costs agreement may not be bound by this cap.

 

The cap applies once statutory refunds and expenses are first deducted from the settlement claim.

 

Statutory refunds include Centrelink benefits paid after injury (but exclude debts owed to Centrelink), medicare reimbursement (just the medicare component and not the gap) and WorkCover repayment (including any lump sum offer accepted by you).  Statutory refunds should not normally include private arrangements, like private medical insurance, income protection or third party loans as these are not based on a statutory obligation to reimburse from settlement funds.

 

Expenses are explained above but will exclude any fees or interest charged on loans to pay the expenses, as well as sundries.

 

EG – a $50,000 settlement has been agreed.  Refunds are $5,000 and expenses are $5,000, leaving a balance of $40,000.

The maximum fee a lawyer can charge is $20,000 incl GST.  Even if the lawyer has reasonable means to justify a much higher fee, they cannot charge it. Essentially, their fee is no more than you receive “in your hands” (subject to private arrangements like loan costs, debts etc).

 

Uplift fee

The maximum uplift fee that a personal injury lawyer can charge is 25% of their professional fees.  Don’t get confused by the uplift fee and the 50% cap.  The cap only comes into the equation once the lawyer has worked out their fee and then will work out if it is above or below the cap.

 

So, if the lawyer can reasonably justify fees of $30,000, and their fees do not breach the 50% cap (after uplift incl gst), then they can charge the uplift (if in the costs agreement) of 25%, making a total fee of $37,500 plus GST.  The total fee is boosted from $33,000 to $41,250 GST incl by this uplift fee.

 

Some lawyers, like me, don’t charge an uplift fee at all.

 

Fixed pricing – hourly rates – stage pricing

Fixed and stage-based pricing touch on the same subject, which is an attempt to provide value-based pricing model in a tough to estimate claim environment.

 

Essentially, for each agreed to milestone, the lawyer charges an agreed amount.  This is more common on the defendant side than with plaintiff law firms.

 

The reason it is uncommon for plaintiff side is the complexity a claim involves, and how quickly it can change.

 

EG a person with seemingly mild head injury, but later shows signs of cognitive functioning impairment, may need very expensive and time consuming investigation, adding tens of thousands to the costs of the claim.

 

We also do not know when the claim will settle.  A claim settling early and informally can be half the cost of one which settles after Court action has gone some way.

 

Hourly rates are used to measure the string (i.e. how long is a piece of string).  The longer the claim goes, the more work is needed, the higher the fees.  This should reward and advantage people with simpler claims that settle early with a lower fee.

 

However, using an hourly rate with the uplift can also reward poor work.  An experienced lawyer could do a job in 1 hour say, at $500 an hour, while an inexperienced junior lawyer, at $300 an hour, may take 2 hours.  So, you are paying a smaller hourly rate for the junior lawyer but because of the extra time taken has ended up costing you $100 more.

 

Hourly rate charging can also lead to over-servicing where pressure is put on all levels of a firm to meet their budgeted hourly outputs.  You can ask for detailed accounting of the time recording and check if the time spent matches what was needed.

 

It is important to get estimates up front, to know who will be working on your claim, and to regularly check in on how fees are tracking against the estimate.  You can also ask what actual work is being done.

 

EG most insurers will start claim investigations by getting your medical records.  It is such a waste if your lawyer does not communicate with them to ensure there is no double up – effectively you might be paying your lawyer to do what the insurer is already doing for free for you.

 

The timing of work is also important.  There is no point sending you to a medical specialist for a medical legal report within 6 months of your accident.  There is no point briefing and getting advice from a barrister before much evidence is available, just to point to the lawyer what they should be doing.

 

Closing

If you need help call now for a free chat or no obligation consultation or maybe even a case review. 😊

 

Disclaimer – This article is designed to share knowledge and should not be relied upon as legal advice.

 

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